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Lisa Audet Opalesque Geneva: Lisa Audet is the founder and CIO of Tall Trees Capital Management LP, a Greenwich, CT-based investment management boutique specialising in energy transition. The firm runs a long/short global equity strategy that invests in secular winners and losers across multiple sectors.
She founded Tall Trees in 2019 after a long career in finance that led her to run the energy and commodities investments for Rob Citrone's global macro long/short fund Discovery Capital. "I learned an incredible amount (in) that 10-year period that I was investing in energy," she told Matthias Knab in a recent Opalesque TV interview. "I was still excited in 2019 about energy, but much more so about the transformation that I saw happening in the sector and the role of technology in both helping to meet growing energy demand, which I think could double by 2050, but also the role of technology in helping to decarbonise energy resources. So, with that, I decided to create my firm, focus on the energy transition in a very holistic way, and look at how we could invest in companies that were utilising technology to help accelerate the energy transition."
The approach to investing in energy tends to focus on either traditional or clean energy, which is a binary approach where the issue of affordability and access to energy gets lost. For her, energy transition is, firstly, about those who have access to abundant energy and the majority who don't - and providing access to energy to all. Secondly, energy transition is the focus on low-carbon and zero-carbon energy, a "structural mega-trend" that will affect all sectors.
"We believe that the path to the energy transition is not about eliminating traditional energy resources, or having unrealistic expectations about how quickly we can ramp renewables, or how big a percentage renewables can be in the energy mix," she says. "It's about how to utilise technology to help companies across various sectors provide the energy that we need and help to decarbonise the economy. There (will) be various winners and losers as we move through this path of energy transition."
The best way to capture that trend is through an equity long/short hedge fund strategy with a directional bias, an understanding of global macro, and deep management of volatility. The strategy has overperformed the markets so far - without investing in the Mag 7.
The four themes
The four themes Tall Trees managers are focusing are electrification, nuclear, copper and data centre infrastructure and all that it implies.
Demand for electricity has seen a massive uptick, driven by EV adoption, re-shoring, building electrification, and data centres. This necessitates an expansion and an upgrade of the electrical grid. Along the supply chain, she prefers investing in power equipment manufacturers.
She believes nuclear energy is going to be an important part of how we address and meet growing energy demand and the opportunity set is in uranium producers and companies that provide maintenance and services to nuclear reactors, as well as independent power producers.
The energy transition is impossible without copper. But as we are moving into a deficit - and deficit pricing - the opportunity set is in copper producers.
Finally, the move from AI to generative AI is increasing the need for investment in data centres. Furthermore, 40% of the energy bill in data centres is used in cooling technology. She finds opportunities in companies that have advanced cooling, especially liquid cooling technologies.
Focus on high conviction ideas
Tall Tree's fund launched in April 2022 with a strategic investment from Tiger Management and had AuM of $38.5m by the end of its first quarter.
The reason for the strategy's outperformance is a strong focus on the highest conviction ideas, which was even more concentrated in 2024. The strategy now has bigger exposures in the names with the highest convictions. She also makes sure that the way she trades allows for nimbleness and fast reactions to events. On the short side, she focuses on the "boring shorts", that is, companies that she feels are structurally challenged in the energy transition, such as those involved in the mining sector, that have unproven technologies, face unanticipated risks from the energy transition, and that have a very low beta.
"We offer a concentrated exposure to the energy transition structural megatrend," she sums up. "We bring global experience and deep energy and commodity expertise to this strategy. We have a non-traditional strategy that has a low correlation to market indices, and we invest actively through a long/short global equity strategy."
You can watch the full interview on Opalesque TV here: The Future of Energy Investment with Lisa Audet
Related article:
06.Jun.2023 Opalesque Exclusive: Long/short hedge fund bets on energy transition being the most attractive investment opportunity today
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